Henderson v Federal Commissioner of Taxation

The case of *Henderson v Federal Commissioner of Taxation* concerned a dispute between the taxpayer, Mr. Henderson, and the Federal Commissioner of Taxation. The matter came before the High Court of Australia.

The central legal issue before the High Court was whether certain payments made by Mr. Henderson to his wife constituted a disposal of property for the purposes of the Income Tax Assessment Act 1936 (Cth). Specifically, the court had to determine if these payments were made in such a way as to avoid tax liability by attributing income derived from those payments to his wife, rather than retaining it as his own assessable income.

Windeyer J, with whom Barwick C.J., McTiernan and Menzies JJ agreed, reasoned that the transactions in question did not involve a true disposal of property in the sense contemplated by the Act. The payments were found to be part of an arrangement where the taxpayer retained effective control and benefit from the funds, despite the formal transfer. The court applied principles relating to the substance of transactions over their form, emphasizing that for a disposal to be effective for tax avoidance purposes, there must be a genuine alienation of the property and the income derived from it. The court considered the taxpayer's intention and the practical effect of the arrangements.

The appeal was dismissed, with the High Court affirming the decision of the lower court that the income derived from the payments was properly assessable to Mr. Henderson.